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Local Credit Unions Benefiting from Bank Blunders

by Katie Pyzyk November 28, 2011 at 11:34 am 4,119 38 Comments

(Updated at 12:05 p.m.) The phrase “bank fees” used to describe a commonly-accepted practice. But in the past few months, rising fees have stoked consumer frustration. As a result, fed up customers have been abandoning big banks, and credit unions — including those located in Arlington — are reaping the rewards.

During the past year, and particularly the past two months, local credit unions have experienced rapid growth. Navy Federal Credit Union, for instance, experienced a 38 percent year-over-year jump in new members in October. Navy Federal has experienced a 23 percent increase in new customers in 2011, compared to its typical annual growth of 7 percent.

The 17,000 member Arlington Community Federal Credit Union, meanwhile, saw a 34 percent increase in new customers from September to October, in addition to a 100 percent increase in new online checking accounts during the same period.

(Disclosure: Arlington Community Federal Credit Union is an ARLnow.com advertiser.)

Although some banks have since rescinded new debit card fees and other banking charges, a grassroots movement toward credit unions and away from big banks seems to be taking hold. It even prompted the creation of Bank Transfer Day, which encouraged people to move their money to credit unions on November 5.

“People are expressing frustration over being treated like a number and not a member,” said Patty Briotta, public relations manager for the Clarendon-based National Association of Federal Credit Unions (NAFCU). “When some banks recalled their debit fees, it was too little, too late.”

Arlington Community Federal Credit Union CEO Brenda Turner said that in addition to accruing new applications, there has been an increase in customers who already held an account suddenly wanting to add another one.

“We could tell they were angry with the big banks because they wanted to move everything,” Turner said. “A lot of times people come in and just want an auto loan because we have great rates. But they wanted to completely clear out of the big banks and come over.”

Previously, many new members were attracted to credit unions due to features like competitive interest rates. Now, those who answered a NAFCU survey listed fees (24 percent) and general dissatisfaction (51 percent) as reasons for making the switch.

“During this challenging financial time, people want to leverage all of their resources and opportunities,” Briotta said. “You’re the boss at a credit union because it’s member-owned and a not-for-profit financial institution.”

Navy Federal Credit Union spokesperson Donovan Fox agreed, adding: “All of our members have a vote and everything that we do is for the benefit of our members. We’re always trying to increase our services, making them better for our members.”

NAFCU has recently ramped up promotion of CUlookup.com, a website it created to help consumers locate local credit unions. The site, which also lists the membership criteria of individual credit unions, has experienced explosive growth. This October saw a 700% year-over-year increase in web traffic this year, according to Briotta.

Although the rush will likely level off, right now Arlington’s credit unions are reveling in the business boom.

“It’s a great deal,” Turner said. “It’s unfortunate that it hasn’t been as widely known the convenience that credit unions offer.”

Said Briotta: “This is an example of Main Street winning over Wall Street.”

  • JamesE

    I put every single purchase on my credit card and pay it off in full each month, daddy needs his points. Also having just been forcefully switched over to Wells Fargo their check reading ATMs are pretty slick.

    • Z

      Bank of America has those ATMs too. Very nice feature.

  • Burger

    Those checking reading ATMs are awful. They take way longer than just sticking them in an envelop and moving on with my life. Now, I have to check them because WF, Citi et al., want to save money.

    What will end up happening is that more people will use the tellers because it is faster.

    • JamesE

      if I don’t have to interact with a human I am all for it, and I never trust the envelop, the reading machine tells me the exact amount and I am done, and instantly puts the money in my account.

      • Quoth the Raven

        I have to say, I’m just the opposite. I love going into the bank and actually talking to the teller. No idea why – maybe a sense of nostalgia or whatever.

        • I used to be that way. Now, I don’t want to take the time. I don’t even want anyone to give me a check to deposit either. Transfer the money or give me cash! If only it were that easy!

  • soarlslacker

    We have had accounts at a fed CU and BofA for years. The credit union charges nothing and they have 90% of our business. We keep a small acount at BofA because they are blocks away, they have a guard so if the bank is open we feel safe at the atm and bank, and they let me bring my small dogs in the bank and give them dog treats. If BofA raises fees or starts charging new fees…then we’ll give up the local BofA branch where we are treated so very well.

  • Clarendon

    I just opened an account at the local Burke & Herbert bank. I think they are the oldest bank in Virginia and it’s free to use the ATM card at any bank. The other banks I’ve used include First Virginia and United Virginia (now BBT and Suntrust). I’ve not seen any advantage to using those giant international banks. Although TD Bank does have extreme branch hours.

    • Question

      So B&H doesn’t charge you for using other banks’ ATMs, but do the other banks charge you?

  • CW

    People can complain about BoA until they are blue in the face but I have been using BoA for all of my adult life and they’ve never done wrong by me. Accurate check-reading ATMs everywhere. Super easy to pay off BoA credit cards from BoA accounts online via transfer, credit card web interface is a whole lot easier to use and clearer than that for my Chase or AMEX cards. Every time I’ve had to interact with their customer service it’s been a good experience. They freeze my accounts any time I travel someplace odd and forget to let them know beforehand, which is a good thing – shows they are looking out for my security.

    • JamesE

      the only “issue” I ever had with my big bank was back in college when the book store charged me 4x and I got hammered with overdraft charges, but they fully reimbursed me for everything.

      • CW

        Yeah, the big guys are pretty good about taking back charges when ridiculous things like that happen.

        • Bob Ivry, Bradley Keoun and Phil Kuntz

          Secret Fed Loans Helped Banks Net $13B

          The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.

          The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

          “TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”

          http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

          • Richard Cranium

            You know, Phil, you CAN get your name legally changed.

    • Carm

      I have never had a problem with BofA either and don’t pay them anything in fees or finance charges on any of my accounts.

  • Arlingtron

    I’ve used credit unions for personal financial services for more than a decade. I now use another credit union for my business. Very few problems. I don’t need an ATM available to me on every corner and there are many machines that are free to use and some even take deposits. I don’t need to have a person handle my transaction. These credit unions have most of the services of the big banks such as online banking and bill paying. I see no benefit of using a big bank and they should all collapse due to their mismanagement and customer abuse. Vote with your feet!

  • G Clifford Prout

    Don’t forget your well run community banks such as Burke and Herbert. You can find them here: http://moveyourmoneyproject.org/find-bankcredit-union

  • Swag

    Got switched from Wachovia to WF over the summer. No issues.

    I put everything on my credit card and pay it off every month. My checking is free. In fact, with the exception of a handful of ATM fees, I’ve never paid them (wachovia or WF) anything in the 6 years I’ve used them.

  • Chris

    Yeah, it’s easy not to charge bank fees when you don’t pay taxes. Credit Unions are a scam, only they screw the taxpayer rather than the account holder.

    • marie

      I left big banks over a decade ago because of their fees. Been a very happy member of USAA Federal Savings Bank, which also doesn’t charge ATM fees and reimburses me if another bank’s ATM charges me a fee.

      Re, Chris’s comment, credit unions–like other nonprofits–don’t pay federal and state income taxes because they serve their members not profit (for shareholders and top execs) and credit unions haven’t been the financial institutions, as you would say, “screwing the taxpayer.”

      • Josh S

        Yeah, hilarious comment re: screwing the taxpayer considering the massive bailouts some of the big banks got.

        But, please, enlighten us as to the “scam” aspect of a credit union. In what way is anyone being “scammed?” Or, if you prefer (not having any evidence of an actual scam), in what way are credit unions harmful to society? Or even to you personally.

        Inquiring minds want to know…..

        • ArlingtonChick

          While I’m sure most of the people transferring to local banks and credit unions based on high fees with big banks, I have had the majority of my money in local banks and credit unions because I like their service. But I also appreciate the fact that they are NOT too big to fail. All banks, especially the local ones, have massive scrutiny from the FDIC every year, and have to open their books to prove that they are not going to fail, like Wachovia almost did (it was “saved” by the last minute deal with Wells Fargo).

          I also don’t see an issue with credit unions not paying taxes, when big banks found enough loop holes, “taxes” are a joke. I am excited to see how credit unions, who spend their money judiciously and with caution (and, oh yeah, DO loan money at low rates) are scams.

        • drax

          +1,000,000 on that hilarious “screw the taxpayers” comment.

          And this means charities are screwing the taxpayers too! Do they know about this outrage?

      • Ali

        Left BoA a few months ago for USAA and LOVE it!

    • DSS10

      I receive a dividend payment each month from my credit union which is for the excess profits that were generated from operations. As to a credit union being a tax scams, commercial for profit banks avoid taxes through tax loop holes that they have lobbied over the years and assume unreasonable risks (40:1 leverage!) which the tax payer either has to subsidize through reduced taxes from their loss or by bail outs (you do remember TARP don’t you?). The best aspect of a credit union is that they invest their deposits in the community by extending loans and financing local economic activity. They do not buy or sell derivatives or trade for their own account with your money. As to local banks, they still have the overhead associated with a for profit business model which they cannot spread out over a large enough deposit so although you may not pay fees the cost of their services are normally higher (loan and mortgage fees and rates) that a credit union and they can and do invest and trade in synthetic derivatives with depositors funds. Lastly, would should look at the 10K for a midsize local bank and review the salaries for their senior executives then look at a credit union disclosure forms. Those salaries have to be paid by someone either by investing in risky securities or “extracting” more revenue from its depositors.

    • Chris (no not that one)

      Sigh, this is an example of why I have the sign in name I have.

    • shirley

      seriously?
      the purpose of the credit union is to act like a co-op — and co-ops aren’t taxed.
      us members are just sharing money amongst ourselves and not just amongst the 1%.

  • General Zod

    I’m a member at NFCU & I think their rapid growth over the last year or so is mostly related to them now allowing all of the other branches in DoD to join not rising bank fees elsewhere.

    • soarlslacker

      I did not know that all of DOD could use them. I thought they were for just one agency. The first time I got past the armed guard at Elec Ave. and was asked overt or covert I about had a fit and answered “spouse”. We have always seen the credit union as an “employee benefit”.

  • NoVapologist

    I doubt credit unions will keep their tax-exempt status much longer. They don’t serve the same purpose they did when that exemption was granted and ~$1bn a year in tax revenue is a lot to give up in this day and age.

    • VaNoplogist

      Yeah, tax exemption is only for REALLY big corporations.

  • Turbo Timmy

    The TBTF banks have been using government money meant to be loaned to small businesses to ‘pay back’ TARP. Also, $475 billion of TARP that was funneled through insurers like AIG has not been paid back.

    But hey, they aren’t charging you a fee, so they must not be costing you anything.

    • NoVapologist

      Your figures are a little off. The total amount of TARP money disbursed was less than $475bn. Most of that has been repaid (AIG and General Motors still owe).

      Perhaps you are including Freddie and Fannie in your calculations. They weren’t technically part of the TARP program and they will likely never pay the government back. In fact, they are currently borrowing from the Treasury to pay the periodic interest they owe the Treasury.

    • Dia

      And folks just wonder why so many small businesses are going out of business because they can’t get any loans…

      The only thing consumers notice is when they try to shop at that cute little shop, it isn’t there any more…

      It seems to me that many people think that anyone that owns a business has money and ability to get more if need be.

      Two cases come to mind, Circuit City and Boarders that could not get enough money to keep afloat. Mind that Boarders went out because some of business decisions were less than prime, and not totally due to the Kindle and Internet. They also could not get the financing to continue the day to day operations from the banks, either. Circuit City’s problem was cash flow, but when the banks cut money for goods, that didn’t help either.

      Worse yet are the micro businesses, ie the mom and pops… Banks won’t loan money unless everything is just perfect, and now it is even worse. Just look around areas here that are less than primo, and you can see partly what the rest of the nation is experiencing.

  • Milburn Drysdale

    Who the hell gets checks anymore? You should try direct deposit.

  • Juanita de Talmas

    Standard and Poor’s downgraded five major U.S. banks Tuesday.

    The credit ratings agency cut Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo and Citigroup to an “A-” minus rating, down from an “A” .

    Hold on to your wallets, taxpayers!

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